The surge in shale production has produced a temporary glut in supplies, causing oil prices to experience a massive bust. After tanking to alow of $44 per barrelin January, falling rig counts and enormous reductions in exploration budgets have fueled speculation that the market will correct sometime later this year.

However, there is a possibility that the recent rise to $51 for WTI and $60 for Brent may only be temporary. In fact, several trends are conspiring to force prices down for a second time.

Drillers are consciously deciding todelay the completionof their wells, holding off in hopes that oil prices will rebound, according to E&E’sEnergyWire. The decision to put well completions on hold could provide a critical boost to the ultimate profitability of many projects. Higher oil prices in the months ahead will provide companies with more money for each barrel sold. But also, with the bulk of a given shale well’s lifetime production coming within the first year or two, it becomes all the more important to bring a well online when oil prices are favorable. With prices still depressed – WTI is hovering just above $50 per barrel – drillers are waiting for sunnier days.

Yet another reason to wait is the possibility that costs for well completions will decline. Oil and gas companies often contract out well completions to third parties, and those companies will face pressure to cut their fees in order to keep business. That works in favor of producers who put their projects on hold for the time being. Well completions can make up as much as three-quarters of thetotal project cost.

Several prominent shale drillers have confirmed they are undertaking such a wait-and-see strategy. EOG Resources, one of the biggest Texas shale drillers, announced its plans in late February to hold off on completions. Chesapeake Energy and Continental Resources have now followed suit.

“We’re intentionally holding production back in 2015, because we believe it’s the prudent thing to do,” Doug Lawler, Chesapeake’s CEO, said in a conference call. Chesapeake has said it maydelay completingas many as 100 wells. EOG has 200 wells awaiting completion, a backlog that will intentionally rise to about 350 this year.

As the industry clears out that queue of wells awaiting completion, a rush of new supplies could come online, pushing WTI prices down once again.

Even with well completions being suspended, supplies continue to build. The latest U.S. Energy Information Administration (EIA) data shows that oil stocks in the United Statesclimbedto 434 million barrels, the highest levels in storage in over 80 years. “My gut feeling is that the oil price could see a double bottom,” Jason Kenney, an analyst with Banco Santaander SA said in aBloomberg interview. “We’ve got too much inventory.” Bloomberg noted that Kenney has a good track record of predicting price swings in the past. Even though rig counts have declined significantly, output has so far proved resilient.

Finally, there is some evidence that the ability to move excess oil into storage may run into trouble if production does not decline. Storage tanks are starting to fill, raising the possibility that a glut could worsen. There is a great deal of uncertaintyaround how quickly this might happen. The EIA sought to clarify, noting that the markets have confused some of its storage figures – some oil supplies in the EIA’s weekly inventory data is actually sitting in pipelines and at well sites, meaning there is more storage capacity available than many news outletshad originally thought.An EIA analyst recently toldBloombergthat overall storage capacity is only at about 60%, and “[w]e still have a way to go before we can consider ourselves to be full,” Rob Merriam, EIA’s head of petroleum statistics said. It would take a few months of strong inventory builds to fill up the remaining storage, perhaps an unlikely scenario, especially if production starts to take a hit. But if storage tanks did start to fill up, prices would dive once again and companies would have to shut in wells and cut back on production.

Rig counts are at six year lows, forcing oil prices up on speculation that supply reductions will soon relieve the oil glut. But a double dip cannot be ruled out.

Originally written for OilPrice.com, a website that focuses on news and analysis on the topics of alternative energy, geopolitics, and oil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energy market professionals around the world.

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Falling gas prices have been a welcome economic reprieve over the past several months. This week, the average price of gas in the U.S. is $2.473 per gallon, according to the EIA, up $0.141 on the week — an increase for the fifth straight week — but still down $1.006 from a year ago. This low average price is largely due to falling oil prices over the past several months — WTI crude averaged $51.69 per barrel in the week ended February 20, down $51.24 from this time last year, when the price sat at $102.93.

Falling gas prices are a windfall for the economy because most Americans spend a huge amount of money on gas. According to the EIA, the average American household spends about 4% of pretax income on retail gas, which worked out to $2,912 in 2012. With just over 115 million households in the country, that’s more than $336 billion, 2.2% of GDP. According to the BEA, we spent even more than that — $421.6 billion in 2012 and $408.7 billion in 2013, about 2.4% of GDP. That’s more money than we spend on Medicaid ($265 billion) and not much less than we spend on on Medicare ($492 billion); it’s more than half of what we spend on defense ($626 billion).

So when gas prices fall, we feel it in our wallets. All of a sudden, because of some meandering, nebulous economic force, Americans have more money to spend on other stuff. This is particularly because wages for most Americans have stagnated and the all-important middle class is dissolving. Right now, the few extra bucks we’re saving at the pump can go a long way.

(Future dates in the chart below are forecasts from the EIA.)

What you’re paying for in a gallon of gas

The price of gas is linked primarily to the price of oil. According to the EIA, crude oil accounts for 62% of the cost of a gallon of regular gasoline. This is the same crude oil whose per-barrel price is often used as a macroeconomic indicator, and its relationship to retail gas prices is one of those reasons. The petroleum market is the beating heart of the energy industry.

When crude oil prices fall, upstream businesses and business units suffer — the price of their product is declining. But cheaper crude oil means downstream companies, those that refine crude oil into consumer-friendly gasoline, have cheaper input costs. Lately, downstream services like this have been bright spots in an otherwise turbulent energy market. Refining accounts for 14% of our costs at the pump.

No matter how much oil the United States produces over the next few years, it will never become the next Saudi Arabia in the global oil market, according to Fatih Birol, the new executive director of the International Energy Agency (IEA).

What’s especially interesting about this forecast is that it directly contradicts what Birol said only three months ago, and he gave no explanation for his change of mind.

On February 26,Birol told The Telegraph’s Middle East Congress in Londonthat OPEC, particularly the Persian Gulf members, will prevail over all other producers for the foreseeable future, even though the revolution in extracting shale oil has been “excellent news” for American producers.

“The United States will never be a major oil exporter. Their import needs are getting less but the U.S. is not becoming Saudi Arabia,” Birol told the conference. “Their production growth is good to diversify the market but it will not solve the world’s oil problems.”

Certainly, Birol acknowledged, 2014 crude production by countries that are not among OPEC’s 12 members was greater than it had been in three decades, helping create an oversupply of oil that caused prices to erode and robbed OPEC producers of some of their market share.

But at least for the next 10 years, the cartel’s two top producers, Saudi Arabia and Iraq, will be the countries best equipped to meet the world’s demand for energy, especially if non-OPEC producers such as Brazil, Canada, and the United States see production falter, Birol said.

“Around 2017, the U.S. will be the largest oil producer of the world, overtaking Saudi Arabia,” Birol said at a news conference in London the day the report was released. “This is of course a major development and definitely will have significant implications.”

Specifically,the IEA report said, Americans will be pumping 500,000 barrels more than Saudi Arabia in 2020 and 100,000 more than the Saudis in 2025. Riyadh will not reclaim its position as the biggest producer until 2030, when it is expected to extract 1.2 million more barrels per day than U.S. producers.

Whether Birol’s forecast is correct now or was correct in November, he was not alone among noted economists and institutions in expecting a major surge in U.S. oil production. The American financial services company Citigroup Inc. issued a report on March 20, 2014, predicting that the United States will overcome Saudi Arabia and Russia as the world’s largest oil producer by 2020.

And more recently, on January 3, former U.S. Treasury Secretary Lawrence Summers said the growth of U.S. oil production could perhaps displace Saudi Arabia as the world’s largest net exporter. “The United States has the chance to be to the energy economy of the next decade what Saudi Arabia has been for the last two to three decades,”he told the American Economics Association conference in Boston.

No one but Summers and the people at Citigroup know whether they’ve changed their minds since they spoke so glowingly about U.S. oil production. And as for Birol, only he knows why he’s changed his mind. But for people whose livelihoods depend on understanding the arc of the oil market, such contradictions are confusing at best.

Originally written for OilPrice.com, a website that focuses on news and analysis on the topics of alternative energy, geopolitics, and oil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energy market professionals around the world.

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Saudi Oil Minister Ali al-Naimi, the architect of OPEC’s strategy to regain market share by causing the price of crude oil to plunge, says his plan is working, and data from petroleum research firms seems to back him up.

Making his first public comments in two months, al-Naimi told reporters in the southwestern Saudi city of Jazan thatthe markets have cooled off, and cited Brent crude, the global benchmark, as an example, noting that its price has stabilized at about $60 per barrel.

He also pointed to data that inexpensive oil is driving up demand, notably in China and the United States, which eventually could lead to price stability or to a price rebound.

But Al-Naimi warned naysayers not to upset this new balance. “Why do you want to rock the markets?”he asked. “The markets are calm. … Demand is growing.”

If al-Naimi is right, then his strategy was correct, and it acted quickly. It was only three months ago at OPEC’s headquarters in Vienna that the Saudi minister pushed through a planto maintain oil production at 30 million barrels a day, declaring a price war with U.S. shale oil producers who rely on costly hydraulic fracturing, or fracking, to extract oil embedded tightly in underground rock.

The U.S. shale producers had not only created a global oil glut, which was depressing the price of oil, but they also had turned their country from OPEC’s biggest customer to a nation headed towards energy independence.

OPEC’s decision led to even lower oil prices, meaning lower revenues, and sometimes even losses, for many oil companies. The financial services concern Cowen & Co. estimatesthat as a result, total capital expenditures for both production and exploration will plunge by more than $116 billion this year.

There’s more optimistic news, particularly on the smaller retail level. The research group JBC Energy says U.S. demand for gasoline grew by nearly a half-million barrels a day in January. In India, it says, the demand was 18% higher in January than in the same month the previous year.

The JBC report said the allure of cheap fuel can alter driving habits, including what car a customer buys next. And that’ssupported by Autodata Publications Inc., which reports that consumers again are opting for cars that are more fuel-hungry: Sales of SUVs and light trucks grew by 19.3% from January 2014 to January 2015, while more economical passenger cars grew by only 7.7%.

Despite this good news for al-Naimi, if the price of oil has finally bottomed out and begins to rise again, won’t the U.S. shale producers get back into the act with a vengeance?

Originally written for OilPrice.com, a website that focuses on news and analysis on the topics of alternative energy, geopolitics, and oil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energy market professionals around the world.

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Many OPEC members say the cartel may have to call an emergency meeting regarding production and prices because of the damage the collapse of oil prices has been doing to their countries’ economies. But the prospects of such a gathering seem remote.

It eventually emerged that the strategy, evidently conceived by Saudi Oil Minister Ali al-Naimi, was to abandon OPEC’s traditional approach of lowering production to keep prices high, and instead to defend market share against oil producers such as Americans using newer, if more expensive, means of extraction such as hydraulic fracturing, or fracking.

In January,al-Naimi told the Middle East Economic Surveythat his aim was to drive oil prices low enough that such “inefficient” production methods would cease to be profitable. But while that approach is having some success, it does little for the budgets of many OPEC members.

Alison-Madueketold the FTthat if the price of oil slips below its current $60 per barrel, “it is highly likely that I will have to call an extraordinary meeting of OPEC in the next six weeks or so.” She said she’d been discussing the possibility with other members of the group. She added that she hoped, but couldn’t be certain, that the price of oil could stabilize at its current $60.

Finally, there’s the possibility that Alison-Madueke’s comments on an emergency meeting were motivated primarily by domestic politics in Nigeria. A higher price for oil would help the country, Africa’s largest crude producer, because normally it provides the government with about 80% of its revenues.

And oneanonymous OPEC delegate told Reutersthat while Alison-Madueke is addressing Nigeria’s electorate, “there are no concrete actions going on to organize any emergency meetings of OPEC countries.”

Originally written for OilPrice.com, a website that focuses on news and analysis on the topics of alternative energy, geopolitics, and oil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energy market professionals around the world.

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Federal Reserve Chairwoman Janet Yellen made her semiannual report to the Senate Banking, Housing, and Urban Affairs Committee in a hearing Tuesday. For the most part her report was optimistic, focusing on the positive signs in the job market and going carefully over both the advantages and disadvantages to low oil prices, while also outlining some less than ideal news on the inflation rate.

However the concentration for many, including Senator Sherrod Brown (D-Ohio), is on how most Americans are fairing under the current conditions — specifically when it comes to wages. This appears to be the consistent theme for the foreseeable future: The economy is improving, but Americans aren’t feeling it. Some variation of this has come out of the mouths of politicians from both sides of the aisle at least once over the course of the last month or two. Senator Brown spoke on this topic in his opening statement of the hearing, saying:

We know the improvements in the economy are not being felt by enough Americans. The gains we’ve made in the past five years — 11.5 net private sector job growth — the last five years come on the heels of nine years when we lost 4.5 million jobs. Some pundits/politicians have been predicting runaway inflation for years. They clearly don’t have a very good grasp of what is happening for most Americas. Low wage growth has continued for a majority of Americans, declining participation in the workforce is troubling, in fact as you pointed out Madam Chair, the income inequality gap has actually widened during this recovery.

Yellen herself admitted low inflation is a concern. “U.S. inflation continues to run below the Committee’s 2 percent objective,” she said in her report, but points to oil price drops as an explanation, the major double-edged economic sword so far this year. “In large part, the recent softness in the all-items measure of inflation for personal consumption expenditures (PCE) reflects the drop in oil prices.”

She goes on to say that “the Committee expects inflation to decline further in the near term before rising gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate.”

Yellen explains the price fall as due to increased supplies worldwide rather than a reduction in demand, and admits that the energy industry will probably be hurt in the short term as a result, with likely job losses. What this means is that a narrow group of American workers and families will be adversely affected, but she states that it will “likely be a significant overall plus, on net, for our economy.”

However those lost jobs make for a convenient argument when it comes to Keystone XL’s potential energy industry job creation. Chairman of the Senate Banking Committee Richard Shelby was among many tweeting on the job opportunity loss from Obama’s rejection of the Keystone XL pipeline bill. “President Obama blocked the creation of tens of thousands of new American jobs by vetoing the #KeystoneXL bill today,” he tweeted.

So the current economy is a cloudy sky, but one expected to clear given active policy. It’s not that the sun isn’t high in the sky, and it’s not that the temperature is overly chilly — the issue is that many Americans can’t see the sun. Yellen’s prescription? She suggests that normalization of policy — pulling back on increasing the goal for federal funds rate — will need to go slow while the Federal Reserve works to manipulate inflation where it needs to go with time, and stabilize market and employment factors.

This could take till sometime near the end of 2016, by her estimates, a bit later than some in the marketplace had been expecting. This indication that interest rates would not be driven up just yet was responded to by a slight increase in the global stock markets on Wednesday, according to Reuters. “I would term what she did yesterday as somewhat ‘jawbone therapy,'” said Keith Bliss, senior vice-president with Cuttone & Co. to Reuters. “She knows the market is listening to every word and she is being just noncommittal enough.” And, indeed, she was positive but not overly so, with the overall forecast optimistic, leaving the ever-constant a matter of getting politicians to agree on how best to direct the U.S. uphill in ways that can be widely felt in other hands.

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Read the original article from Wall St. Cheat Sheet]]>http://www.cheatsheet.com/politics/how-does-yellen-reveal-gas-prices-as-americas-double-edged-sword.html/feed/0The Solar Industry Is About to Have Its Day in the Sunhttp://www.cheatsheet.com/business/the-solar-industry-is-about-to-have-its-day-in-the-sun.html/
http://www.cheatsheet.com/business/the-solar-industry-is-about-to-have-its-day-in-the-sun.html/#commentsWed, 25 Feb 2015 21:15:03 +0000Sam Beckerhttp://wallstcheatsheet.com/?p=515319

Source: Getty Images

It’s been a long, winding road for solar energy. The industry itself has been held back for many years, if not decades, by high costs, low adoption rates, and slowly-evolving technology. But that seems to be changing, and fast, particularly in the last several years. Suffice it to say, the industry may finally be getting its day in the sun.

“From 2010 to 2014, employment in the solar energy industry grew by more than 85%,” reads The Economic Report to the President, submitted by the Council of Economic Advisors for February 2015. “Moreover, employment in the solar industry is projected to increase by another 21% in 2015.” While it’s clear that renewables like wind and solar power still lag well-behind their fossil fuel counterparts, that gap is closing, and the government aren’t the only ones taking notice.

A recent article from Slate details how many big businesses are also buying in on the solar industry, which may ultimately threaten rival industries like coal. Specifically, Slate points to recent investment decisions by Apple, Procter & Gamble, and Kaiser Permanente to sign up for huge energy deals with solar and wind power companies, which will not only help the public image of these firms, but also help lower their emissions and carbon footprint. Daniel Gross, the author of the Slate piece, says that the decisions being made by these big companies has less to do with PR, and more to do with the fact that the renewable energy industries are finally able to compete price-wise with fossil fuels.

“What you’re seeing is that as energy prices move to the north, the cost of installation is going down and we’re delivering competitive energy,” SolarCity’s VP of commercial sales Erik Fogelberg told Slate. Gross concludes that corporate mentalities are shifting to using green power because it’s becoming more affordable, not because they’re willfully purchasing renewable energy at higher prices to meet sustainability goals or anything else.

“Over the next 12 months, solar companies expect to add a total of 36,000 new solar workers, representing 20.9% employment growth over 2014,” the Solar Foundation writes. “This estimate compares with a projected 1% increase in employment in the overall economy over the same period.”

While those numbers show definite growth and confidence in the industry, there are still some bumps in the road ahead. Namely, changes to tax incentives that are scheduled to hit in the near future may end up actually hurting the industry, just as it begins to hit its stride. “Approximately 75% of businesses indicated the 30% ITC (federal investment tax credit) has significantly helped their business,” the Solar Foundation says. “Despite its importance, the 30% ITC is scheduled to drop down to 10% for commercial projects, and disappear completely for residential, a change that 60% of companies expect will impact their future business prospects.”

If those tax incentives are allowed to change, as they are scheduled to, the result could be workforce reductions, and higher prices for the end user — the barrier to entry that has kept so many from adopting renewables in the first place. With that in mind, does it make sense for regulators to keep tax incentives in their current form, in order to spur the industry on? Many don’t like the idea of a “handout” of sorts to big business, and these incentives seem to be artificially propping up the industry, and allowing it to grow.

Solar is set to have its breakthrough within the next several years, but it appears to be dependent upon the government’s help. Either way, renewables are in a lot better shape now, and have a much brighter future, than even just a few years ago.

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Read the original article from Wall St. Cheat Sheet]]>http://www.cheatsheet.com/business/the-solar-industry-is-about-to-have-its-day-in-the-sun.html/feed/0Will US Shale Boom Continue or Have a Hiatus?http://www.cheatsheet.com/business/will-us-shale-boom-continue-or-have-a-hiatus.html/
http://www.cheatsheet.com/business/will-us-shale-boom-continue-or-have-a-hiatus.html/#commentsWed, 25 Feb 2015 19:15:05 +0000Andy Tullyhttp://wallstcheatsheet.com/?p=515277

Andrew Burton/Getty Images

The conventional wisdom recently has been that North America will keep producing shale oil for some time despite the higher costs associated with hydraulic fracturing and the 50% drop in oil prices over the past eight months.

The thing about conventional wisdom is that it tends to be challenged, sometimes successfully. And shale’s biggest producer in the United States, EOG Resources Inc., is saying the recent rapid growth in its own shale production will end this year. And this idea is supported by people with experience in oil.

Certainly, though, the logic behind the theory of continued shale production is solid: Oil prices will bottom out, then begin to rise to the point where crude from shale becomes profitable again despite the cost of fracking. The only question is whether OPEC would then accept U.S. shale as a competitor and cut its own production to shore up prices.

A forecast issued February 17 by BP was more specific. The BP Energy Outlook 2035 expects U.S. production will grow rapidly for the immediate future, then “flatten out.” Or, as BP’s chief economist, Spencer Dale, told The Wall Street Journal, “U.S. [shale] oil can’t continue to grow rapidly forever.” And OPEC will be ready to fill that vacuum.

That may very well happen a bit sooner, Houston-based EOG Resources said February 19. It said it was “intentionally choosing returns over growth.” The company stressed, though, that if oil prices were to rise back to around $65 per barrel from the current $50, it could resume “double-digit” growth in 2016.

Until and unless that rebound comes, EOG said, it is cutting capital expenditures this year by about 40% and holding back on its crude reserves to make sure it has enough product in the event of such a short turnaround on prices. Other U.S. shale producers, notably Noble Energy of Houston and Devon Energy of Oklahoma City, are cutting expenses at about the same rate.

Cutting costs is the key. Shale oil wells deplete quickly, so continued production requires constant drilling for new sources. And the drilling involves the more expensive method of hydraulic fracturing, or fracking, which isn’t consistent with cutting costs.

“The thing that has surprised me … is that companies large and small, financially strong, financially weak have really cut capital spending much quicker than I have seen before,” said Bruce Vincent, a 40-year veteran of the oil industry who just retired as CEO of Swift Energy Co.

Despite the expense of fracking, shale oil has at least one important edge over conventional oil fields, which often are shared by competing oil companies. Under conventional oil extraction, a company that stopped drilling to cut costs ran the risk that another company would take all the oil from that reservoir for itself.

That doesn’t apply to shale, because the oil is locked tightly within underground rock and isn’t available without specific drilling, helped by fracking. That means shale producers can afford to suspend extraction until it becomes profitable again without fear of losing the oil to competitors.

Or as Harold Hamm, the CEO of Continental Resources Inc. of Oklahoma City, told an oil conference in January, “[Now] you can leave it in the ground. In the old days you had to produce because everybody was sucking on the same straw.”

The only question that remains is whether the price of oil rebounds, and how soon. That will depend largely on whether OPEC finally decides to cut its own production.

Originally written for OilPrice.com, a website that focuses on news and analysis on the topics of alternative energy, geopolitics, and oil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energy market professionals around the world.

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The latest oil train derailments could force the federal government to tighten the regulatory screws further than they had planned.

The train disasters in Ontario and West Virginia were the latest in a long line of explosions from oil trains, or “bomb trains” as they have been called derisively by their critics. The problem, regulators thought, were the thin-walled flimsy DOT-111 railcars, which had not originally been designed to safely carry volatile crude oil.

U.S. federal transportation regulators began writing new rules that would require the phase-out of these older cars, in favor of newer reinforced designs.

The tricky problem facing regulators is one inconvenient detail – the newer railcars that have been trumpeted as much safer were the ones that derailed and exploded on February 16 in West Virginia. The so-called CPC-1232 cars are an upgrade over the DOT-111, with thicker hulls to prevent puncturing and pressure valves to vent gas in the event of the railcars overheating.

Nevertheless, even though the CPC-1232 cars have demonstrated that they are inadequately safe, much of the crude hitting the nation’s railways are not even traveling to that standard. Railcar manufacturers do not have the capability to ramp up production of the CPC-1232s fast enough, with a backlog of at least 50,000 cars. Meanwhile, there are still around 171,000 DOT-111s still in operation.

And in another loophole exposed by E&E News, railroad companies can even continue to use damaged railcars which leak oil, with the approval from the federal government.

Another problem is the extra volatility that Bakken crude has demonstrated. Due to the associated volatile gas that comes with oil drilled in the Bakken, the oil carried by train coming from North Dakota is more dangerous than conventional crude. The state of North Dakota has required that producers process the oil to remove the gases, and that rule takes effect on April 1. While it is so far unclear if the crude that exploded in the West Virginia incident had undergone this type of processing, it would not have been required.

“At this point, we have to let this order go into effect and let the operators get the equipment installed,” the Director of North Dakota’s Department of Mineral Resources Lynn Helms said in response to questions raised in the wake of the West Virginia derailment about North Dakota needing to address safety more aggressively.

Safety on the rails is critical because of the surging volumes of oil moving on the nation’s railways. An estimated 400,000 barrels of oil were transported by railcar in 2013, a dramatic jump from just 11,000 barrels in 2009, according to data from the Association of American Railroads.

The federal government has been criticized for taking way too long to issue new safety standards. The Department of Transportation proposed new rules in August, but has now twice pushed off finalizing those rules, missing the original deadline at the end of 2014.

The proposal has not committed to one rail car design, instead it reviewed several with different safety features and levels of wall thickness. They also may only require a gradual phase-out over the next two to three years of the DOT-111 railcars. Some politicians, including Senators from North Dakota, have resisted a swifter phase-out, fearing damage to the state’s oil production. The oil shipping industry has heavily lobbied the U.S. Congress for favorable treatment.

But the latest disaster in West Virginia is once again raising pressure for stronger action. “Yet again, we have seen a rupture-prone railcar carrying volatile crude oil wreak havoc on a community, and it further demonstrates that the federal Department of Transportation and Office of Management and Budget must release tough, comprehensive railcar standards to help avoid a future tragedy,” U.S. Senator Chuck Schumer said in a statement.

Canada is also stepping up its efforts. The government is considering a tax on oil-by-rail shipments, with the proceeds put into a compensation fund to cover damages from future derailments.

All eyes turn to the White House where the Department of Transportation recently sent a “comprehensive” set of rules. A final version is expected in May. Pressure will be on the Obama administration to ensure a weak rule doesn’t emerge as the West Virginia disaster is just the latest reminder that rail safety regulations are inadequate.

Originally written for OilPrice.com, a website that focuses on news and analysis on the topics of alternative energy, geopolitics, andoil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energymarket professionalsaround the world.

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Read the original article from Wall St. Cheat Sheet]]>http://www.cheatsheet.com/business/recent-bomb-trains-expose-regulatory-failures.html/feed/0Can Tesla’s Latest Venture Live Up to the Hype?http://www.cheatsheet.com/business/can-teslas-latest-venture-live-up-to-the-hype.html/
http://www.cheatsheet.com/business/can-teslas-latest-venture-live-up-to-the-hype.html/#commentsMon, 23 Feb 2015 17:15:07 +0000Colin Chilcoathttp://wallstcheatsheet.com/?p=514738

Source: Tesla

Elon Musk and his company Tesla Motors will revolutionize the way you drive, and while they’re at it, the way electricity is priced and consumed. At least, that’s the plan. Thus far under Musk, such plans have sold quite well, even if only based on future promise. Is it all hype or can Tesla change the energy game?

Musk’s latest — and perhaps greatest — venture doesn’t involve cars at all. Instead, Tesla has its eyes set on the home. The company plans tounveila home battery in the next month or two, with production beginning in around six months.

The stationary lithium-ion batteries will operate much like those in Tesla’s cars but will instead allow homeowners and businesses to capture and store excess energy — from rooftop solar panels, for example. The stored energy can then be saved for a rainy day (quite literally) or sold back to the grid to reduce electricity bills. Commercial-end customers canexpectsavings of up to 30%.

Like electric vehicles, it’s a niche market, but one that is rapidly expanding. As previously discussed, the rapid drop in the cost of photovoltaics is leading to solar deployment beyond the means of, and in detriment to, the grid and utilities providers. Stationary batteries provide a way out, and Tesla, along with Musk’s Solar City, plans to work with utilities, putting the storage in their hands.

“In this scenario, grid operators are suddenly empowered to store and discharge solar energy where and when it’s needed most, smoothing out peaks and ramps,”saidSolar City Chief Technology Officer (CTO) Peter Rive.

According to GTM research, the U.S. solar-plus-storage market willsurpass$1 billion by 2018, nearly 25 times greater than its current market value. The broader global battery storage market isexpectedto reach $400 billion by 2030. Price, of course, still remains a barrier to such success, but the market and Tesla are trending in the right direction.

Source: Citi

Citi research expects the cost of lithium-ion storage to decline at roughly a 10% clip annually. For its part, Tesla plans to outdo that via its $5 billion so-called Gigafactory. The factory, currently under construction in Nevada,aimsto be operational in 2017, at which point production will begin. And produce it will.

The Gigafactory will cover 1,000 acres, employ 6,500 people, and, when running at full capacity, couldconsumeup to 17% of the global supply of lithium. By 2020, Tesla expects to produce more lithium-ion batteries annually than were produced globally in 2013. Thirty percent of the factory will be dedicated to stationary batteries, which Tesla Chief Technology Officer J.B. Straubelbelieves“can scale faster than automotive.”

Economy of scale is the goal, and Tesla hopes it can essentiallyhalveits per-kilowatt-hour cost. It’s an ambitious plan and one with real risks, which Tesla is well on its way to addressing.

Upon its announcement, exposure to lithium markets and a lack of experience were targeted as the Gigafactory’s Achilles’ heel. A fairly stable market, lithium has been growing, on average, 5% to 10% in cost per annum. Lithium is still plentiful and relatively cheap to extract, but buyers — primarily in Asia — are increasingly demanding more.

With delicate math and bold price targets, Tesla can ill-afford strong volatility or significant competition in the lithium market. And so, as it did with its Model S, Tesla hassecureda partnership with Panasonic, which will manufacture and supply lithium-ion battery cells at the Gigafactory.

The hype is real and economically competitive, and widespread energy storage is on pace to change the game. Renewables suddenly become a viable substitute for baseload generation, currently dominated by coal; oil leaves the power sector; and storable electricity, on a large scale, transforms power markets into something resembling oil and gas markets. Of course, it’s a transformation that will take some time, but Tesla, with a little leap of faith, has the jump.

Originally written for OilPrice.com, a website that focuses on news and analysis on the topics of alternative energy, geopolitics, and oil and gas. OilPrice.com is written for an educated audience that includes investors, fund managers, resource bankers, traders, and energy market professionals around the world.

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